Home Loans In Lake Charles, Louisiana

Lake Charles, LA, real estate market is on the rise. However, the high demand and low inventory push home prices through the roof, making it harder for many people to buy a home. In many cases, home buyers – especially first-time home buyers – look to government-guaranteed mortgages to secure the financing they need for a home. 

While many different home loan programs are available in Lake Charles, conventional and FHA home loans are the most popular ones. 

Let’s go over the difference between the two home loan programs to decide which one is best for you.

Conventional vs. FHA Loans

Conventional home loans are loans that the government does not guarantee in any way or form.  The lending company assumes most of the risks associated with these loans — especially if the borrower defaults on the mortgage. Because of this, the eligibility requirements for conventional loans are more stringent than that of government-backed loans.

On the other hand, FHA loans receive backing from the government through the Federal Housing Administration. Because of this support, lenders are more confident in extending credit to borrowers – even those with less-than-ideal credit histories, knowing that the government will insure the loan against future default.

Other important distinctions between these two loan options are as follows:

• Down Payment

The lowest down payment possible for conventional mortgages is 3% for borrowers with impeccable credit. The standard down payment requirement for conventional loans is 5% of the sales price. On the other hand, the minimum down payment for FHA loans is 3.5 percent if your credit score is at least 580 and 10% if your credit score is 500 to 579.

Whether you choose to go for a conventional or FHA loan, we recommend maximizing your down payment (if you can) to lower your monthly mortgage payments.

• Credit Score

While a conventional loan may allow you to make as little as a 3% down payment, it comes with high qualification standards, particularly credit score.

The minimum credit score you need to qualify for a conventional loan is 620, while FHA loans accept borrowers with credit scores as low as 500.

• Mortgage Insurance

Conventional mortgages require borrowers to pay PMI or Private Mortgage Insurance if the down payment is less than 20%. When your balance on a conventional mortgage reaches 78 percent of the original purchase price, you may cancel the PMI off your loan.

On the other hand, FHA loan borrowers are always required to pay MIP or mortgage insurance premium, regardless of how much down payment they make.

This MIP is for the life of the loan but can be canceled if you refinance from an FHA loan to a conventional loan or ultimately pay off the mortgage.

Moreover, there are two types of mortgage insurance for FHA loans: upfront mortgage insurance (UFMIP) and mortgage insurance premium (MIP). UFMIP is 1.75 percent of the loan amount and is usually financed into the mortgage, whereas MIP as annual premiums ranges from 0.45 percent to 1.05 percent.

• DTI Ratio

Most conventional lenders require borrowers to have a debt-to-income (DTI) ratio of 45 percent or less, but the limit varies by lender. For FHA loans, on the other hand, lenders may still accept DTIs as high as 50% and up to 55% with compensating factors.

The Federal Government amends the loan limits for conventional and FHA loans every year.

• Loan Limits

Conforming loan limits for 2022, which apply to conventional mortgages, are $647,200 for single-unit properties in most country areas and $970,800 for high-cost areas.

For FHA loans, the nationwide loan limit for a one-unit property in 2022 is $420,680.

Lake Charles, Louisiana Mortgage Lender

Capital Home Mortgage provides conventional and FHA loans in Lake Charles and several other home loan programs like VA, USDA, and Jumbo loans. Furthermore, our home loan programs offer competitive interest rates and lower processing fees.

Capital Home Mortgage is a direct mortgage lender, which means we will handle your application from beginning to end and even finance your mortgage from our funds. You won’t have to deal with numerous third parties to find a suitable home loan in Lake Charles.

Apply For A Home Loan With Us Today!

We at Capital Home Mortgage know how time-consuming and complicated the mortgage process can be, especially if it is your first time. We’re committed to expediting the process through streamlined application-to-approval processes and flexible underwriting procedures.

Speak with one of our Lake Charles loan officers today and find the best home loan for you by calling (225) 208-7599.